Primecap: The Best Stock Pickers You've Never Seen

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bru
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Primecap: The Best Stock Pickers You've Never Seen

Post by bru » Thu Jan 22, 2015 9:01 pm

Has this been posted? I've yet to master the search function here.

Article about the Vanguard Primecap funds. I like the statistic in the first paragraph. "Stunning wealth" indeed.

Primecap is one of my only managed funds. I've owned it for close to 20 years. Wish it had been 30. I'll check back in 10 years.

http://www.kiplinger.com/article/invest ... -seen.html

edit: I guess no one else owns Primecap.

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by investor » Fri Jan 23, 2015 7:45 pm

I have owned Primecap, Wellington, Healthcare and Berkshire Hathaway for some time....no regrets

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by tibbitts » Fri Jan 23, 2015 8:41 pm

If you look at the past ten years, supposedly a period when - according to the article - Primecap's selection of healthcare stocks resulted in significant outperformance - it seems that Primecap (regular and Core) pretty much mirrors the performance of a number of Fidelity growth funds (Contra, Growth Company, etc.)

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by Kenkat » Fri Jan 23, 2015 8:49 pm

tibbitts wrote:If you look at the past ten years, supposedly a period when - according to the article - Primecap's selection of healthcare stocks resulted in significant outperformance - it seems that Primecap (regular and Core) pretty much mirrors the performance of a number of Fidelity growth funds (Contra, Growth Company, etc.)


I'm not really sure about the Fidelity funds, but Vanguard Primecap Admiral is in the top 4% of its category over the last 10 years, according to Morningstar.

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Primecap [Kiplinger article]

Post by CABob » Mon Feb 09, 2015 11:10 pm

[Thread merged into here, see below. --admin LadyGeek]

An article from a recent Kiplinger's Personal Finance magazine that I found interesting.
http://www.kiplinger.com/article/invest ... -seen.html
Active funds anyone? :happy
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Re: Primecap

Post by AQ » Mon Feb 09, 2015 11:44 pm

I hold this fund. Like the performance, but hate the distribution though. In particular this tax season

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Re: Primecap

Post by kenyan » Tue Feb 10, 2015 12:23 pm

Obviously they have done well. They haven't really beaten the Large Growth Index (or TSM) over the past 5 years, but had a good run prior to that. Did well in 2014. Maybe I'd consider it - doubtful, but maybe - if I could actually invest in the funds at Vanguard, but I can't.
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Re: Primecap

Post by Kenkat » Wed Feb 11, 2015 10:08 am

Held since 1998 in a tax-deferred account. It's all good...

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Re: Primecap

Post by nisiprius » Wed Feb 11, 2015 10:45 am

Vanguard PRIMECAP--the name is all in capital letters, I don't know why, but it is and Kiplinger's has it wrong--certainly looks like a "good fund."

I have gradually come to dislike Kiplinger's more and more, though. They pretend to be Consumer Reports and they really are Popular Photography. That is to say, I am not quite sure whom they are serving, but it is not really their readers.

Stephen Goldberg in particular--not the author of the article about PRIMECAP--projects a personal point of view for sure, and seems to forever writing articles with titles like The Five Best Load Funds for 2014. (Yes, really, the best load funds. You can't make this stuff up).

(OK, that's not fair. He does say you should never pay a load. How do you manage that? He says "talk to your adviser about having the sales charge waived." Can you really do that successfully? Anyone tried? That's a real question, not a rhetorical question, I'm curious to know).

What the heck, it was written at the start of 2014. I'm not going to check them all but let me check the first one: "American Funds New World F2 (symbol NFFFX) offers a better way to invest in emerging markets)." Blue: "better way to invest in emerging markets." Orange: dumb Vanguard index fund. Yeah, sure the blue line is better--and that doesn't even take into account the load.

Source: Morningstar
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Last edited by nisiprius on Wed Feb 11, 2015 10:51 am, edited 1 time in total.
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Re: Primecap

Post by SpringMan » Wed Feb 11, 2015 10:51 am

I am a fan of all the Vanguard Primecap funds. For those that hold Wellington or Wellesley Income and get that alert from Vanguard's Portfolio Analysis Tool "Caution your portfolio emphasizes value", Primecap and Capital Opportunity funds are an excellent way to provide the growth components to make that alert go away. Currently they are only open to Flagship clients and limited to $25K per calendar year. Primecap Core is also an excellent large blend fund. I believe it has no dollar limit but is also closed to non-Flagship clients. No limit is likely because Primecap Core is not available in admiral shares, the others are.
edit: PRIMECAP maybe should be all caps but google also finds results of PrimeCap and Primecap. I think that is a nit perhaps any confusion could be avoided using fund ticker symbols but that is usually frowned upon in this forum.
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Re: Primecap

Post by JohnFiscal » Wed Feb 11, 2015 11:18 am

using fund ticker symbols but that is usually frowned upon in this forum.


A bit of a tangential question. Is this so? using the ticker is not good practice here? Use the full fund name only?

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Re: Primecap

Post by kenyan » Wed Feb 11, 2015 11:23 am

JohnFiscal wrote:
using fund ticker symbols but that is usually frowned upon in this forum.


A bit of a tangential question. Is this so? using the ticker is not good practice here? Use the full fund name only?


Fund name first, ticker second. Using tickers in isolation is frowned upon.
Retirement investing is a marathon.

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Re: Primecap

Post by SpringMan » Wed Feb 11, 2015 11:31 am

JohnFiscal wrote:
using fund ticker symbols but that is usually frowned upon in this forum.


A bit of a tangential question. Is this so? using the ticker is not good practice here? Use the full fund name only?


The reason given by many is that people don't know them by heart and may not take the time to look them up. I have seen comments like "You will get more responses if you use fund names rather than ticker symbols". Of course, using both fund names and ticker symbols is fine. I think it is worth while using both fund names and tickers if one is listing a complicated portfolio. I personally don't think tickers only are a problem for common Vanguard funds since I am familiar with them but others may not be.
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Re: Primecap

Post by garlandwhizzer » Wed Feb 11, 2015 12:13 pm

I posted recently the question "Are there skilled investors?" and mentioned Primecap as an example of skill. Their record speaks for itself. Interestingly they do not load up on factors as such and instead concentrate on producing alpha which they do fairly reliably. Their portfolio has low turnover, high concentration in only a limited number of names (the opposite of diversification), usually large cap growth companies bought at value prices during significant down cycles and held for a long time until their true worth is realized by the market. A similar style to Buffett when you think about it, although Warren is a bit more valuey. Both focus on durable competitive advantage discovered through in depth thorough research in contrast to the usual research fluff of Wall Street firms.

The potential problem with Primecap is asset bloat which eventually happens to all successful actively managed funds. Their long run of success has brought in huge inflows that Vanguard's current restricted access only partially controls. Flagship clients and institutional investors are still given access to these restricted funds although annual contributions are limited. Unfortunately there is a limited and perhaps decreasing supply of alpha in the large cap market which tends to be scrutinized heavily. As more money pours into their funds at some point their assets exceed the available alpha generating opportunities. I don't know if this is starting to happen now or not, but Primecap Management's approach up to now has been both unusual and effective.

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Re: Primecap

Post by bru » Wed Feb 11, 2015 12:31 pm

I posted this article three weeks ago. Got little attention.

viewtopic.php?f=10&t=156360

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Re: Primecap [Kiplinger article]

Post by White Coat Investor » Wed Feb 11, 2015 12:34 pm

I don't have time to monitor a dozen active managers. All I need my manager to do is get the return of the asset class. That's good enough to meet my goals.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Primecap [Kiplinger article]

Post by Toons » Wed Feb 11, 2015 12:52 pm

PrimeCap core here since 2006 :happy
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Re: Primecap [Kiplinger article]

Post by JohnFiscal » Wed Feb 11, 2015 1:14 pm

I've owned VPMAX (PRIMECAP) since I bought a large, single lump sum for an IRA in March, 2004. The IRR based on yesterday's close is 11.03%.

Probably time to move some of this over to my index funds.

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Re: Primecap

Post by nisiprius » Wed Feb 11, 2015 2:19 pm

SpringMan wrote:
JohnFiscal wrote:
using fund ticker symbols but that is usually frowned upon in this forum.
A bit of a tangential question. Is this so? using the ticker is not good practice here? Use the full fund name only?
The reason given by many is that people don't know them by heart and may not take the time to look them up. I have seen comments like "You will get more responses if you use fund names rather than ticker symbols". Of course, using both fund names and ticker symbols is fine. I think it is worth while using both fund names and tickers if one is listing a complicated portfolio. I personally don't think tickers only are a problem for common Vanguard funds since I am familiar with them but others may not be.
Another problem is that many Vanguard funds have more than one ticker symbol because of the different share classes:

Vanguard PRIMECAP Fund Investor Shares (VPMCX)
Vanguard PRIMECAP Fund Admiral Shares (VPMAX)

Often, there will be three: Vanguard Total Stock Market Index Fund, Investor shares (VTSMX), Admiral Shares (VTSAX), and ETF (VTI). (And some people have institutional-class shares in their 401(k)).
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Re: Primecap [Kiplinger article]

Post by Buckeye » Wed Feb 11, 2015 2:40 pm

Core here since it opened.

I'm guessing probably time to dump it now.

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Re: Primecap [Kiplinger article]

Post by JoMoney » Wed Feb 11, 2015 4:17 pm

I've mentioned this before, but I don't think Primecap's return is all that impressive if appropriately measured against a benchmark with similar objectives.
It is explicitly a fund of mixed large and mid-cap stocks. The average/median market cap of the fund has gone up and down considerably over time.
Something like a 50/50 S&P500 and S&P400 Mid-Cap index has shown comparable performance. My question would be if Primecap is genuinely skilled at switching back and forth between a portfolio that switches styles across the size spectrum, or if they were just lucky in having benefited from the circumstances that led to mid-caps outperforming in recent times. If mid-caps hadn't been the better style, would Primecap still have used the strategy they did, and would any of us be talking about them without the performance related to that?
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Re: Primecap [Kiplinger article]

Post by island » Wed Feb 11, 2015 4:22 pm

Buckeye wrote:Core here since it opened.

I'm guessing probably time to dump it now.


Why?

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by LadyGeek » Wed Feb 11, 2015 4:49 pm

FYI - I merged CABob's thread into here.
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Re: Primecap [Kiplinger article]

Post by Kenkat » Wed Feb 11, 2015 5:04 pm

JoMoney wrote:I've mentioned this before, but I don't think Primecap's return is all that impressive if appropriately measured against a benchmark with similar objectives.
It is explicitly a fund of mixed large and mid-cap stocks. The average/median market cap of the fund has gone up and down considerably over time.
Something like a 50/50 S&P500 and S&P400 Mid-Cap index has shown comparable performance. My question would be if Primecap is genuinely skilled at switching back and forth between a portfolio that switches styles across the size spectrum, or if they were just lucky in having benefited from the circumstances that led to mid-caps outperforming in recent times. If mid-caps hadn't been the better style, would Primecap still have used the strategy they did, and would any of us be talking about them without the performance related to that?
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I think there is some merit to your point - i.e., some of Primecap's performance can be attributed to more mid-caps. However, looking further (just now), I do have the following observation:

Primecap has an average market cap of ~64m. The market caps for the ETF's used in your comparison are: iShares Core S&P 500 (IVV) = ~70m and iShares Core S&P Mid-Cap = ~4.7m. So at 50/50, your comparison portfolio is significantly smaller than Primecap (average of ~37m vs. Primecap's ~64m). Since Mid Caps outperformed Large Caps over this period, that helped your comparison portfolio. Despite that, Primecap outperformed by nearly 0.5% per year. In other words, Primecap outperformed that 50/50 benchmark despite being significantly more slanted towards large caps. In fact, it is almost as large as the S&P 500.

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by Higman » Wed Feb 11, 2015 5:21 pm

Here is some more info on PRIMECAP Management Company:

http://www.odysseyfunds.com/index.html

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by RunningRad » Wed Feb 11, 2015 5:21 pm

I missed out on PrimeCap, but I got in PrimeCap Core when it opened in 2004. Great gross performance, but can be brutal around tax time.
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Re: Primecap [Kiplinger article]

Post by Toons » Wed Feb 11, 2015 7:40 pm

island wrote:
Buckeye wrote:Core here since it opened.

I'm guessing probably time to dump it now.


Why?



+1 Why :shock:
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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by Yesterdaysnews » Wed Feb 11, 2015 8:17 pm

Is it possible to get into any of the PRIMECAP funds if you are Flagship? I thought part of the deal is you can get into some closed funds?

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by jwvanhoven » Wed Feb 11, 2015 8:26 pm

Am I wrong? I do not mind paying long term Capital gains rather than not getting the gains.
Taxes are with us if we want our stocks to go up.

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by SpringMan » Wed Feb 11, 2015 8:27 pm

Yesterdaysnews wrote:Is it possible to get into any of the PRIMECAP funds if you are Flagship? I thought part of the deal is you can get into some closed funds?

Yes it is. Capital Opportunity and PRIMECAP are limited to $25K per calendar year. There are no dollar limits on PRIMECAP core fund.
Best Wishes, SpringMan

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Re: Primecap [Kiplinger article]

Post by JoMoney » Thu Feb 12, 2015 2:28 am

kenschmidt wrote:...
I think there is some merit to your point - i.e., some of Primecap's performance can be attributed to more mid-caps. However, looking further (just now), I do have the following observation:

Primecap has an average market cap of ~64m. The market caps for the ETF's used in your comparison are: iShares Core S&P 500 (IVV) = ~70m and iShares Core S&P Mid-Cap = ~4.7m. So at 50/50, your comparison portfolio is significantly smaller than Primecap (average of ~37m vs. Primecap's ~64m). Since Mid Caps outperformed Large Caps over this period, that helped your comparison portfolio. Despite that, Primecap outperformed by nearly 0.5% per year. In other words, Primecap outperformed that 50/50 benchmark despite being significantly more slanted towards large caps. In fact, it is almost as large as the S&P 500.


I didn't rehash everything I had posted over in this recent thread,
But ...
if you go back and look at the funds "median market-cap" overtime you'll see quite a bit of variance. Currently VPMCX has a median market-cap of $72.1-billion which might make it appear comparable to an S&P500 index which has a median market-cap of $77.2-billion... but if you look at the "Portfolio Characteristics" back in 2005 you'd see it significantly smaller (middle-er?) at $22.8-billion (at the end of 2005 the median market cap of S&P500 was $53.3-billion.)

The funds average or median market-cap relative to that of the market has varied quite a bit over time.
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Re: Primecap [Kiplinger article]

Post by Kenkat » Thu Feb 12, 2015 8:59 am

JoMoney wrote:
kenschmidt wrote:...
I think there is some merit to your point - i.e., some of Primecap's performance can be attributed to more mid-caps. However, looking further (just now), I do have the following observation:

Primecap has an average market cap of ~64m. The market caps for the ETF's used in your comparison are: iShares Core S&P 500 (IVV) = ~70m and iShares Core S&P Mid-Cap = ~4.7m. So at 50/50, your comparison portfolio is significantly smaller than Primecap (average of ~37m vs. Primecap's ~64m). Since Mid Caps outperformed Large Caps over this period, that helped your comparison portfolio. Despite that, Primecap outperformed by nearly 0.5% per year. In other words, Primecap outperformed that 50/50 benchmark despite being significantly more slanted towards large caps. In fact, it is almost as large as the S&P 500.


I didn't rehash everything I had posted over in this recent thread,
But ...
if you go back and look at the funds "median market-cap" overtime you'll see quite a bit of variance. Currently VPMCX has a median market-cap of $72.1-billion which might make it appear comparable to an S&P500 index which has a median market-cap of $77.2-billion... but if you look at the "Portfolio Characteristics" back in 2005 you'd see it significantly smaller (middle-er?) at $22.8-billion (at the end of 2005 the median market cap of S&P500 was $53.3-billion.)

The funds average or median market-cap relative to that of the market has varied quite a bit over time.


Looking at the other topic, it was your posts in that thread that made me think "hmm - I hadn't thought about that angle before". So - I do think there is merit to your idea and the fact that the market cap of Primecap was smaller in the past would strengthen that idea. So, I think it would be very valid to say "some of Primecap's outperformance is do to a higher weighting of mid caps". What I am less sure about is how much and would not think that "all" of the outperformance can be attributed to this.

Benchmarks are always tricky, especially for funds that shift or change styles, be that intentional or just the end result of some other selection process. Knowing what I know about Primecap's style, I think is the latter. In these cases, it can be difficult to construct a benchmark in reverse to evaluate past performance. When I bought Primecap (and Windsor II) in 1998, it was to cover large cap. I wanted to split Growth and Value and at the time, Vanguard's available large cap Growth and Value Indexes (Barra 500 Growth and Barra 500 Value) were just a composite of the S&P 500 - so why not buy just the S&P 500 - except my whole point was to split it apart, remembering that this was a time when growth was king and value was dead. So, for my case, a large cap benchmark is what I had in mind on the date of purchase.

In retrospect, if we go back and historically reconstruct Primecap's portfolio from this point in time, we can explain some, maybe much of it's performance. Of course, if we go back and take it down to an individual security level, we could explain ALL of Primecap's performance. But, that information was not available for my decision in 1998 and so it is difficult to determine whether this really tells us anything or not.

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Re: Primecap: The Best Stock Pickers You've Never Seen

Post by SpringMan » Thu Feb 12, 2015 11:14 am

jwvanhoven wrote:Am I wrong? I do not mind paying long term Capital gains rather than not getting the gains.
Taxes are with us if we want our stocks to go up.

We all want our funds to go up but there is a big difference from distributed capital gains and unrealized capital gains. The unrealized capital gains enjoy a stepped up basis when they go to heirs for one. Unrealized capital gains leave the investor in control as to when to sell and realize them. They can do it when it least impacts their taxes. For example, when they have offsetting losses or are in a low income bracket.
Best Wishes, SpringMan

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